So, you’ve never been taught personal finance skills.
You don’t know what taxes are, you don’t know how to save money, you don’t understand how to stop spending or having your paycheck being eaten up by fees and bills.
I get you.
It’s hard to know what
Today, I’ve got 6 tips to master for someone without personal finance skills.
Don’t worry, these aren’t difficult! They’re all simple, nothing complex or too difficult in here.
The Art of Delayed Gratification
It’s so tempting to look at the fast cars and expensive clothes on social media and be jealous.
It looks like that person’s got it all, and that fast car of fancy pair of shoes will bring them the fame or fortune you want, too.
That’s not the case.
Humans tend to want more and more even after they receive a thing that’s awesome. Suddenly it’s not shiny enough.
Another problem is that it’s much easier to go out and buy the shiny thing on credit, because you don’t have the money right now. And this is how you fall into a trap.
When the shiny thing loses its luster, you’re still stuck with the payments on it!
Chances are, the shiny thing you want, whether it’s a pickup truck, an expensive meal, a new pair of shoes, you can find a cheaper version of for sure. Used pickup trucks, dinner at mid-priced restaurants, and shoes purchased on sale, will work just as well.
Better yet, if you can find out whyyou want that thing, and then waiting at least 24 hours before you buy it, you’ll be saving a lot of money in the long run.
The Art of Saving Properly
There is an art to saving money, and there’s hundreds of websites out there talking about everything from cutting your cable bill to saving money on food shopping.
The number one trick, for someone who doesn’t have personal finance skills, is to automate savings into a bank, preferably a high yield savings account, and don’t touch that money.
If you’re the type of person who tends to blow their entire paycheck in a weekend, you may need to set up a savings account at a different bank and pour your money into that. You can easily set up a bank account at a place that has a high yield savings account. Then, set up automatic transfers from your regular bank to your new account, even if it’s just $10 a week. In a year, you’ll easily have $1200 set aside for emergencies.
The Art of Shopping Smarter
Here’s something you may not know about store brands and regular brands.
They’re very often from the same plant, using the same equipment and packaging process, only the bottles and labels may be different!
That’s just one example of saving money.
You don’t have to clip coupons or spend hours online comparison shopping. Just being careful of where you shop is a good idea.
A real life example: I was looking for a new pour-over coffee maker because mine broke. I found one on Amazon that looked promising, but in order to take advantage of their free shipping, I needed to purchase something else; and there was nothing else I wanted at that time.
I did a quick Google search, found the exact same coffee maker on an independent coffee supplier. They were offering sales on that particular company’s products. Even with shipping, it worked out cheaper than buying through Amazon!
The Art of Avoiding Scams
Scammers are getting more and more sophisticated every day.
It used to be just the “Nigerian Prince” emails, or simple “cheap Viagra” emails.
Nowadays scammers can pose as your bank and pretend there is something wrong, to get your account information and wipe it clean. Others pretend to overpay you on an item you’re selling, only for the bank to overturn the check and charge you for it.
The largest scam is MLM companies, where you need to purchase products to sell from that company, told to sell those products in an oversaturated market, and are emotionally manipulated when the product predictably doesn’t sell.
The answer?
Education.
And no, this doesn’t mean listening blindly to what others tell you.
(This is how MLM companies work, by the way, they hope that you won’t go researching about them, and that you are ignorant of basic business practices.)
It’s easier just to listen to whatever everyone says, but sometimes, they have an interest in misleading you, whether that’s financial or emotional.
That sounds cynical. And it is. But it’s the truth.
You have the internet at your fingertips. There’s bound to be something somewhere on what’s happening to you. However, it’s your job to learn about how to avoid scams. Google is your friend here.
And if it’s really the bank, they won’t get mad if you say “Hold on a few minutes, I need to take care of something, I will call you back, what was your name so I can ask for you?” hang up, and then call them back from the number listed on the bank’s official website. I’ve heard of scammers doing their best to keep you on the phone no matter what. Just hang up.
The Art of Paying Off Debt
Debt is modern slavery.
Debt robs you of a certain amount of power, your spending power, and turns it towards the people you owe, who now have that power over you.
That’s why when you have massive amounts of debt, you feel powerless and hopeless.
What to do?
The number one thing to do is to get an exact handle on your debt. And yes, this involves sitting down and going through everything you owe, including your cell phone bills, credit card debt, student loans, car payments, rent or house payments, food budget and entertainment budgets.
Once you’ve figured that out, you can choose two different options.
The snowball method, popularized by Dave Ramsey, involves you ranking the debt from smallest to largest, regardless of interest rate, and paying it off, starting with the smallest debt. When the debt is paid off, you then take the interest payment you were paying, and applying it the next largest debt, and so on, until the debt is paid off.
For example, pretend you have 3 debts: a medical bill at $1,000 at 0% interest, paying $200 per month, a car to pay off at $14,000 with a 6.5% interest rate and a $324 payment, and a student loan for $5,000 at 7.6% interest rate and you were paying $200 on it.. You’d start with the $1000 bill. When the bill is paid off, you then take that $200 you were paying and apply it to the student loan. When that’s paid, you now take the $400 from the student loan and the medical bill and apply it to the car.
This works because it takes advantage of human psychology – you tend to get a feeling of accomplishment when a debt is paid off and keep wanting to do it.
The avalanche method is where you rank the debt according to interest rate and pay it off.
In the example above, you would start with the student loan, because it’s the highest interest rate. Next would be the car payment, and finally the medical bill.
This method is the most fiscally responsible, because you will end up paying much less in interest over time.
But the best way to pay off debt is to just pick a method and stick to it!
The Art of Using Loans Responsibly
This is slightly more advanced personal finance skills, but it does bear mentioning here.
People use loans for many different things. Whether for student loans, credit card debt, or for upgrading their home.
But part of getting a loan means paying it back, with an added interest rate.
So you will need to decide if it’s really worth it. If it is, then look for a loan that’s lower than your current interest rate, and look for a fixed interest loan. A variable interest rate fluctuates based on an index over the term of the loan. A fixed loan, has the same interest rate over the term of the loan.
In Conclusion
If you’re thinking, “yeah, easy for you to say, you don’t know my struggle”, you’re right, I don’t.
But I do know that saving money, paying off debt, avoiding scams and buying stuff I don’t need, are the absolute basics of having a strong financial backbone.
Even someone without personal finance skills can understand these simple concepts.
And even if they sound difficult, you can just pick one and work with it for a while. I promise you, it works.
Let me put it into perspective: Your favorite pro athlete didn’t become pro by giving up.
And neither should you!
Over to you: Which of these concepts do you “click” with the most? Let me know in the comments!